Portfolios for Long-Term Investors

54 Pages Posted: 22 Mar 2021 Last revised: 7 Jul 2021

See all articles by John H. Cochrane

John H. Cochrane

Hoover Institution; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: February 22, 2021

Abstract

How should long-term investors form portfolios in our time-varying, multi-factor and friction-filled world? Two conceptual frameworks may help: First, look directly at the stream of payments that a portfolio and payout policy can produce. Second, include a general equilibrium view of the markets’ economic purpose, and the nature of investors’ different preferences, risk-taking ability, and function in that equilibrium. These perspectives can rationalize some of investors’ behaviors, suggest substantial revisions to standard portfolio theory, and help us to apply portfolio theory in a way that is practically useful.

Keywords: Portfolios

JEL Classification: G11, G12

Suggested Citation

Cochrane, John H., Portfolios for Long-Term Investors (February 22, 2021). Available at SSRN: https://ssrn.com/abstract=3790823 or http://dx.doi.org/10.2139/ssrn.3790823

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